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Real Estate Portfolio: Tips to Achieve Maximum Cash Flow

Aerial view of real estate in neighborhoodAll real estate investors, novice and advanced, are after the goal of generating substantial positive cash flow from investments in their real estate portfolio. According to Upkeep Media, there are many reasons why a real estate investor would want to prioritize the objective of positive cash flow.

Advantages of investment properties with positive cash flow:

The property pays for itself

Aside from your down payment on the property and the mortgage closing costs, you do not have to invest a dollar of your own money into the property for maintenance and mortgage payments. The rent from the rental is enough to cover the cost of owning the property. Instead of paying to own the asset, a rental property with positive cash flow pays you.

Easier mortgage approval

You’ll have an easier time getting a loan if you can prove the cash flow potential of a rental property. If the property is profitable from the outset, the risk to the lender is significantly lower. A rental property with positive cash flow gives you more negotiating power when discussing mortgage terms with your lender.

Build your portfolio faster

One rental property with sufficient and consistent cash flow may be all you need to start building a portfolio of rental properties. The income from the property pays the mortgage and provides the capital to invest in other properties. Your journey to a portfolio of rental properties is faster when you focus on cash flow properties.


How to Build a Real Estate Portfolio for Maximum Cash Flow

Person counting cash at a desk with papers, calculator, and laptopIdeally, property investors want to own several properties with excellent cash flow. Still, many won’t achieve that goal due to a refusal to adopt specific mindsets and insights needed to succeed. To start building a real estate portfolio that generates positive cash flow, you’ll need a system in place with the following components:

1. A competent team

Some investors might be confused as to how assembling a team can help you produce a profitable real estate portfolio. Even if the assets are yours, you’ll want the valuable input of various experts to help you reach your destination more efficiently. In this way, property investing can be viewed as a team activity. A great network prevents avoidable mistakes because you will have the opportunity to learn from others. They’ll let you know what worked for them and what didn’t. Some experts that can help you on your investing journey include mortgage brokers with experience in investment property mortgage, insurance brokers, tax strategists, estate agents, attorneys, financial planners, accountants, contractors, and other maintenance service providers.

2. Property investment strategy

Some questions to ask yourself when choosing a strategy: What does your local market offer? What strategy presents the highest opportunity for success? What kind of properties should you be investing in? Are you better off investing in commercial real estate, residential properties, or a combination? If you think you should buy residential properties, should these be single-family homes, duplexes, or apartment buildings? If you prefer to invest in commercial real estate, which niche offers the best opportunities based on your capital, location, and experience?

3. Property acquisition strategy

Two people shaking hands in front of a houseYou need a list of criteria for assessing the cash flow potential of the property you are about to buy. This checklist should be broad enough to let you examine the property’s neighborhood characteristics and every detail. Look at vital numbers like rental rates for the area, cost of maintenance, occupancy rates, vacancy rates, the potential for appreciation, and projected ROI. It should give you an objective basis for comparing that property with a similar property in the exact location or a different city. This checklist eliminates the risk of subjective decision-making.

4. Property management

Your chosen property management strategy will have significant consequences on the performance of your investments. Things like marketing, tenant screening, rent collection, property inspection, maintenance schedules, and efficient eviction processes will have an impact on your occupancy and vacancy rates. Property management determines the quality of tenants you can attract and your rental rates. As a rule, having professional property managers is the best decision for the overall success of your assets.

5. Tax reduction strategy

Many real estate investors overlook the significance of proper planning for rental property taxes as a means to increase cash flow. Taxes are often an investor’s highest expense, so how can planning for them be especially helpful? Think of it this way; if you don’t have a professionally-designed tax plan, you may find yourself paying out money that could have gone into growing your portfolio. While you’ll still have to pay taxes overall, optimizing the process will help you find savings here and there that can add up fast. Hiring a tax consultant is a small cost compared to the benefits that they can bring to your rental property business.

If you want to maximize cash flow from your properties and give yourself the means to scale your portfolio, you need to tighten the systems for finding, buying, managing, and selling your real estate investments. Take the time to create a solid strategy, build a reliable network of experts, and allow yourself some flexibility to move efficiently towards your real estate investing goals.

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